Contents. The East Coast Economic Region: Poised For Transformation 3. The ECER At A Glance 4

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2 Contents The East Coast Economic Region: Poised For Transformation 3 The ECER At A Glance 4 Overview of the Petrochemical and Polymer Industry in Malaysia 6 World-Class Petrochemical Hubs in the Malaysia 8 Kertih Polymer Park: Malaysia s First Fully Integrated Polymer Hub 10 Myriad of Polymer Products 13 The ECER Incentives Package - Kertih Polymer Park 14 Contact Us 17

3 The East Coast Economic Region (ECER), covering the states of Kelantan, Terengganu, Pahang and the district of Mersing in Johor, is now poised to become a dynamic region in South East Asia by offering various opportunities to manufacturers and investors. Strategically located in the east coast of Peninsular Malaysia, the ECER has the potential to become the main gateway for trade and industry within the Asia Pacific region, which commands a total population of about 2 billion people. The vision and mission that will guide the transformation of the ECER into a developed Region by 2020 is defined by three main characteristics distinctive, dynamic and competitive. The distinctiveness of the ECER is portrayed through its natural beauty, abundant resources, unique culture and heritage known throughout the world. To maintain this characteristic, a balanced and sustainable development is emphasised. The dynamism of the ECER reflects the potential for the Region to grow and develop at a faster pace through innovation and a shift in economic orientation, structure, technology and mindset. The competitiveness of the ECER lies in its ability to attract local and foreign direct investments. 3

4 The ECER At A Glance The vision is for ECER to be a developed Region by The ECER s vision is defined by three main characteristics: Distinctive Dynamic Competitive Scope of ECER Land Area : 66,736 sq km (51% of Peninsular Malaysia) Total Population : 3.9 million (2005), or 14.5% of Malaysia s total population Total Initiatives : 189 projects Total Investment : RM 112 billion ( ) Key Clusters Mission To move the economy up the value chain To raise the capacity for knowledge and innovation To address persistent socio-economic inequalities, constructively and productively To improve the standard and sustainability of the quality of life To strengthen the institutional and implementation capacity Key Clusters Tourism Oil, Gas & Petrochemical Manufacturing Agriculture Education Key Enablers Social & Human Capital Development Transportation Infrastructure Property Environment To accelerate the growth and development of the ECER, a special vehicle has been established through the East Coast Economic Region Development Council (ECERDC). Key Enablers The ECERDC plays a leading role in promoting and stimulating economic and social development as well as private sector investment in the Region. The Council acts as the one-stop centre to fast track investment applications and approvals. It provides counselling, advisory services and processes tax incentives and non-tax incentives for projects. To meet the varying needs of investors, the ECERDC also customises incentives on merit basis to be recommended for approval by the National Committee on Investment (NCI). ECER Projected Growth by 2020: GDP Growth Rate 8.5% GDP RM 65,930 million GDP Per Capita RM 13,510 Population 4.88 million Source: Strategic Framework for the ECER SEZ 4 5

5 Overview of the Petrochemical and Polymer Industry in Malaysia The oil, gas and petrochemical industry is one of the leading industries in Malaysia, with significant hydrocarbon reserves located in offshore Terengganu, contributing significantly to the nation s gross domestic product (GDP). In ECER, there exist two major downstream clusters located in Kertih, Terengganu and Gebeng in Pahang. Although major facilities are already in operation, there still exist opportunities to strengthen linkages with other sectors. These sectors seek to expand the activities of the industry in the downstream and manufacturing related sectors, to add more value to existing output. World class petrochemical manufactures have established plants in Malaysia, providing a steady supply of feedstock material for the polymer industry, leading it to become one of the most dynamic industries in Malaysia s manufacturing sector. Polymer products manufactured locally range from common household items, packaging materials and conveyance materials, to parts and components for the electrical and electronics, automotive, office automation, computer and telecommunication industries. Key Statistics of Polymer Industry in Malaysia Total no. of manufacturers Approx. 1,500 Total no. employed Approx. 95,000 people Total sale (2007) RM 16 billion (up 2.6% from 2006) Total resin consumption (2007) 1.9 million tonnes Per capita resin consumption (2007) 75 kg Total exports (2007) RM6.8 billion Plastic industry sub-sectors Packaging Electrical & electronics Household Automotive Construction Agriculture Others Source: MIDA 6 7

6 World-Class Petrochemical Hubs in Malaysia Potential Sources Feedstock Products Applications Petrochemical Plants in Kertih On-Site Utilities There are two integrated petrochemical complexes currently in operations in ECER: The Kertih Integrated Petrochemical Complex (KIPC) in Terengganu. Situated within the PETRONAS Petroleum Industry Complex (PPIC), KIPC focuses on ethylene based products. The Gebeng Integrated Petrochemical Complex (GIPC) in Pahang is also an integrated petrochemical complex focusing on propylene-based products. PPIC is home to 41 plants and facilities with investments from Malaysia s national oil company PETRONAS alone amounting to RM70 billion. It not only offers world-class infrastructure and facilities, including logistics and distribution systems to support downstream manufacturing activities, but also extensive products to be used as feedstock, particularly in the development of a wide range of polymer resins and materials. In addition to the varied on-site suppliers, polymer manufacturers close to PPIC are also able to import feedstock from external providers by utilising the nearby Kuantan Port and the Kertih- Kuantan Railway System (KKRS) as part of their distribution system. With PETRONAS having laid the foundations with substantial investments over 35 years in its integrated petrochemical complex, the nearby Kertih Polymer Park (KPP) provides the best opportunity for investors to reap maximum benefits in terms of cost savings and reduced capital outlay. Polyethylene (M) Sdn Bhd Petlin (M) Sdn Bhd Vinyl Chloride (M) Sdn Bhd Petrochemical Plants in Gebeng Polypropylene (M) Sdn Bhd Eastman Chemicals (M) Sdn Bhd Kaneka Paste Polymers Sdn Bhd Kaneka Malaysia Sdn Bhd PolyPolymerAsia Pacific Sdn Bhd Toray BASF PBT Resin Sdn Bhd BASF PETRONAS Chemicals Sdn Bhd Polyethylene (PE), incl. high density (HDPE) & linear low density (LLDPE), specialty compounds and enviromentally degradable polymer Low density polyethylene (LDPE) Polyvinyl chloride (PVC) Polypropylene (PP) Polyester copolymers Dispersion polyvinyl chloride Methyl methacrylates copolymers Polyacetals Polybutylene terephthalate (PBT) Acrylic monomers, plasticiser and intermediates (e.g. tetrahydrofuran) - General purpose films - Heavy-duty films - Cast-stretch films - Blending partners - Environmental friendly products - Mono & multi layer films (food packaging, zipper bags, shrink wrap, heavy-duty bags, film for agriculture produce & industrial packaging film) - Pipe - Flooring - Wire & cable - Building/construction - Film & sheet - Automotive parts - Automotive parts - Appliances - Film - Fibre & filaments - Automotive - Bottles - Sheets & films - Construction - Electrical cable insulation - Portable electronic accessory - Toys - Erasers - Coating - Acrylic plastics - Automotive & electronic parts - Telecommunication & office equipment - Cosmetics containers - Mechanical appliances & equiment - Household electrical appliances - Automotive & electronic equipment and parts - Computer parts - Household appliances - Impact modifier, specialty adhesives (laminating, packing), construction - PVC industries (film & sheets, wire & cable, packaging, footwear) - PVC adhesives - Electricity - Nitrogen - Steam - Potable water - Demineralised water - Cooling water - Waste water Treatment - Pressurised air - Condensate return On-Site Services - Polymer technology centre - Emergency & fire fighting services - Laboratory - Medical - Centralised warehousing for raw materials & products - Maintenance services - Administrative - Railway - Port (bulk liquid & containerised facilities) - Tankage - Pipe rack 8 9

7 Kertih Polymer Park: Malaysia s First Fully Integrated Polymer Hub A key initiative in the development of the country s downstream petrochemicals industry, Kertih Polymer Park (KPP) is the first fully integrated polymer hub in Malaysia. Located within the PETRONAS Petroleum Industry Complex (PPIC), KPP will be supporting polymer and polymer-related manufacturing activities and services providers within a specified locality measuring 140 hectares in Kertih. The Kertih Polymer Park (KPP) Master Plan Road Reserve 40m PROPOSE ROAD 40M The Park takes on an attractive plug-and-play development model, whereby the requisite support facilities and common services will be put in place, allowing investors to immediately start their operation upon relocating to the KPP. With an objective to promote further downstream investments in the polymer and polymer-related industries, KPP will be tapping into the potential synergies from integration with nearby Kertih Integrated Petrochemical Complex (KIPC). The Park s development will also be supported by world-class research and development input from the PETRONAS Polymer Technology Centre (PPTC), a market-driven technology research & development (R&D) centre to enhance customer technical services and product improvement and development for polymer applications. PPTC aims to spur the growth and global competitiveness of the polymer industry in the KPP by carrying out R&D for polymer application, joint venture projects with manufacturers and end users and offering technical services including product testing, technology development and training. The Centre will also foster a closer working relationship between polymer producers and manufacturers in KPP to raise the standards of the polymer industry in Malaysia. The overall strengthening of the sector in ECER will allow investors to participate in a host of support services, such as the supply of materials, technical and lab services, warehousing, distribution and wholesaling activities, as well as retailing. LEGEND: Road Reserve 30m Detached Industrial Lot Water Tank Sewerage Pump Station PPU Road Reserve PLOT HECTARE / ACRE PHASE HECTARE / ACRE WATER TANK 55m x 90m ha. PLOT HECTARE / ACRE Road Reserve 30m PPU ha. SEWERAGE PUMP STATION 0.3 ha. Road Reserve 30 m Propose Drainage 20m HIGH VOLTAGE POWER LINE Road Reserve 30 m SURAU 0.25 ha. FOOD COURT 0.25 ha. STP 0.35 ha. SSU 0.19 ha. VACANT LAND 1.37 ha. Road Reserve m FMD ha. Road Reserve 30m HI ESSENCE CABLE (Existing) ha. PHASE HECTARE / ACRE Phase 1C ha. Road Reserve 20m Road Reserve 30m Road Reserve 30m EXISTING INDUSTRY ha. PPU 0.25 ha. Road Reserve 20 m Road Reserve 40 m GAS PIPELINE (6985) GAS PIPELINE (2026) EXISTING ROAD (40 METER) TRAIN STATION 5276 LAND & GENERAL VCM P.T ETHYLENE 11 & DERIVATIVES P.T (OPTIMAL) Key Statistics of Kertih Polymer Park Development Phase 1 Development Phase 2 Total Projected Private Investment Total Projected Number of Employment 70 hectares 53 hectares RM2.5 billion 10,500 The Kertih Polymer Park (KPP) Master Plan. Upon completion, KPP is projected to attract over RM2 billion worth of investments

8 Myriad of Polymer Products Key Supporting Infrastructures in KPP PETRONAS Polymer Technology Centre (PPTC) Kertih Port (for liquid cargoes) Kuantan Port (for dry and bulk cargoes) Kertih Terminal for Centralised Tankage Centralised Emergency & Fire Fighting Services Centralised Utility Facilities Benefits to the Industry and Local Populace Add value to national hydrocarbon resources by moving up the product value chain and expanding downstream activities in the petrochemical industry into Polymer and its related industries Capture more resource-based value domestically through the manufacturing of finished products locally Enhance the competitiveness of Malaysian polymer industry and provide a focused development to cater for specific needs Ensure a competitive base for local producers via: - the tapping of on-site operational and infrastructural synergies - efficient supply of raw materials (just-in-time) and - economies of scale and direct cost savings (centralised services, freight savings, etc.) Expand employment and entrepreneurship opportunities as well as creates demand for other ancillary services Facilitate the transfer of technology, knowledge and skills to local small and medium enterprises (SMEs) involved in polymer and its related industries and Attract domestic and foreign investments in polymer and its related industries Participation Opportunities The Kertih Polymer Park is open to local and foreign investors in the following areas: SMEs in polymer manufacturing with the following profile: - export-oriented domestic manufacturers - companies aspiring to reach global markets - companies seeking expansion Foreign-based companies seeking overseas ventures in Malaysia Specialty or high-end polymer compounders and manufacturers Other manufacturers and suppliers supporting the polymer industry (e.g. speciality packaging, pallet, specialty chemicals including pigments, dyes, additives, antioxidants and UV light stabilizers) Packaging manufacturers (e.g. specialty packaging, pallet suppliers) Logistics and other special service providers (e.g. Health, Safety & Environment (HSE), waste management, R&D, etc.) 12 13

9 The ECER Incentives Package - Kertih Polymer Park The ECER Incentives Package - Kertih Polymer Park ECER Incentives Other Incentives Activity Incentives (To qualify for these incentives, companies must commence operations before 31 December 2015) Activity/Cluster Incentives These incentives are mutually exclusive/to be utilised upon expiry of ECER Incentive Package Petrochemical and Industrial Park Development projects in designated locations in the ECER Master Plan Kertih Polymer Park, Terengganu Companies developing infrastructure of industrial park: Income tax exemption of 100% for 10 years commencing from the year company derives statutory income, or Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years Stamp duty exemption on instruments of acquisition or leasing of property relating to industrial park Companies undertaking promoted activities in the park: Customised incentives based on merit of each case, or Income tax exemption of 100% for 10 years commencing from the year company derives statutory income, or Training Royalty payments to non-residents (franchisors) for franchised education programmes approved by the Ministry of Education Training of employees for the purpose of upgrading and developing the employees craft, supervisory and technical skills or increasing the productivity or quality of its products, in approved training institutions Pre-operational training by companies (which do not contribute to HRDF) for the acquisition of craft, supervisory or technical skills related to the production of their products Pre-operation training of potential employees within one year before commencement of business Withholding tax exemption Double deduction on training expenses incurred Double deduction on training expenses incurred in the year of assessment in which the gross income first arises Single deduction on training expenses incurred Other Incentives Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years Application to be submitted to ECERDC Import duty and sales tax exemption on raw materials, components, machinery, equipment, spare parts and consumables that are not produced locally and used directly in the activity. Research and Development (R&D) Cash contribution to approved research institutes Payments made for the use of the services of approved research institutes and companies Research on commercialization of research findings Reinvestment & Promotion Reinvestment in petrochemical and manufacturing activities Promotion of industrial park overseas Double deduction on cash contribution Double deduction on payments for services rendered 50% tax exemption on income (honorarium/royalty) received Reinvestment allowance (RA) of 60% of qualifying capital expenditure incurred to be offset against 100% of statutory income in promoted areas for 15 years from the year of assessment of first claim Double deductions on expenditure incurred Activity/Cluster Training Investment in building used for industrial, technical or vocational training approved by the Minister Cash contribution to non-statutory income oriented vocational training institutions and those established and maintained by a statutory body Incentives These incentives are mutually exclusive/to be utilised upon expiry of ECER Incentive Package Industrial Building Allowance: Initial allowance of 10%, and an annual allowance of 3%. Single deduction Export Promotion Expenditure incurred for the promotion of export by resident companies Export Credit Insurance Premiums paid to approved local insurance companies Premiums paid to local insurance companies for cargo exported or cargo imported Promotion of Malaysian Brand names by Malaysian companies (at least 70% Malaysian-owned) which are registered proprietor of the brand Investment in buildings used as bonded warehouses for storage of goods for exports and re-export Certification for recognized quality systems and standards, and halal certification Double deduction for expenses incurred on: - registration of patents, trademarks - product licensing overseas Double deduction on payment of premiums Double deduction on payment of premiums Double deduction on expenses incurred in advertising the brand Industrial building allowance of 10% on qualifying expenditure for each year of assessment Double deduction on expenditure incurred The above claims to be submitted to the Inland Revenue Board 14 15

10 Contact Us If you are an investor planning to establish or expand your business opportunities in the East Coast Economic Region (ECER) we will provide you with professional assistance. We will be the first point-of-contact for all your investment inquiries. Companies planning to start or expand operations in the ECER can obtain information and assistance from the East Coast Economic Region Development Council. We will help you harness the ECER s competitive edge and capabilities to achieve your business objectives. East Coast Economic Region Development Council (ECERDC) Tel : /22 Fax : secretariat@ecerdc.com.my Website : Kuala Lumpur Office Level 69, Tower 2 PETRONAS Twin Towers Kuala Lumpur MALAYSIA Tel : Fax : Kelantan State Office Ground Floor & Mezzanine Lot 137 & 138 Bangunan Sutera Inn Prima Jalan Dusun Muda off Jalan Bayam Kota Bharu, Kelantan, MALAYSIA Tel : Fax : Terengganu State Office Ground Floor & 1st Floor 100B Jalan Sultan Zainal Abidin Kuala Terengganu Terengganu, MALAYSIA Tel : Fax : Pahang State Office B8002 Sri Kuantan Square Jalan Teluk Sisek Kuantan, Pahang MALAYSIA Tel : Fax : ECER/ East Coast Economic Region Development Council (ECERDC) 2010 All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner (ECERDC). Disclaimer: While every reasonable care has been taken in preparing this document, ECERDC cannot be held responsible for any inaccuracies. All information and specifications are current at the time of preparation and are subject to change as may be required. Renderings and illustrations are artist s impressions only and cannot be regarded as representations of fact. 17